NEW YORK The
steel sheet market could see a noticeable shift away from
contract buying and into spot buying as a result of ongoing
2014 contract negotiations between U.S. steelmakers and
While U.S. steel mills
have held firmly to previously announced plans to move away
from index-minus pricing, a number of options have been brought
to the table, including fixed-price options, quarterly and
six-month options, and just buying off an existing index
without a discount (
amm.com, Oct. 23). However, some customers
question just how attractive contracts look so far.
"Why would I even want
to commit to that?" one Midwest service center source
A possible result is
that buyers could prefer to procure more of their stock
inventory tonnage on the spot market rather than lock in a
contract because the amount of benefit has diminished greatly.
But if enough buyers move over to spot buying, that could
potentially hurt mills that are less competitive or could make
the spot market much more volatile.
about how volatile the markets were back in 2008-09. But with
mills holding firm, this means that service centers are going
to be buying more at a time. This will lead us (back) to more
volatility," a second Midwest service center source said. "When
they think prices are low theyll buy more and push out
lead times, and then hold off when prices are high. Service
centers are going back to playing the game."
AK Steel Corp.
chairman, president and chief executive officer James L.
Wainscott said in an earnings conference call this week that
the steelmaker is trying to move away from the "volatile" spot
market and more into contract business.
"I think the people
who are buying on CRU-minus right now have been hit with such a
shock that they havent caught their breath because the
mills are holding on, and its not even a question at this
point," one East Coast service center source said. "With no
CRU-minus deals, the mills are basically telling people
youre a spot buyer now. For huge (end-user) accounts, you
can remain a CRU buyer for the stability. But for stock stuff,
would I want to be a CRU buyer? I dont think so. At this
point, its easier to play the market."
complained, though, that a true spot market doesnt exist
at the moment because spot and index-minus deals are extensive,
making it difficult to differentiate a spot buyer from a
contract buyer. While a downside for U.S. mills in the possible
buying pattern change is losing secured tonnages, an upside
could be that mills take advantage of higher pricing seen in
the third quarter, when U.S. mills kicked off a number of
successful price hikes.